Correlation Between Sovereign Metals and Future Metals

Can any of the company-specific risk be diversified away by investing in both Sovereign Metals and Future Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sovereign Metals and Future Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sovereign Metals and Future Metals NL, you can compare the effects of market volatilities on Sovereign Metals and Future Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sovereign Metals with a short position of Future Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and Future Metals.

Diversification Opportunities for Sovereign Metals and Future Metals

-0.06

Correlation Coefficient

Sovereign Metals  Future Metals

Good diversification

The 3 months correlation between Sovereign and Future is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL and Sovereign Metals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sovereign Metals are associated (or correlated) with Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Future Metals go up and down completely randomly.

Pair Corralation between Sovereign Metals and Future Metals

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 0.7 times more return on investment than Future Metals. However, Sovereign Metals is 1.44 times less risky than Future Metals. It trades about -0.14 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.53 per unit of risk. If you would invest  4,050  in Sovereign Metals on October 6, 2024 and sell it today you would lose (250.00) from holding Sovereign Metals or give up 6.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sovereign Metals  vs.  Future Metals NL

Sovereign Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sovereign Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Future Metals NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sovereign Metals and Future Metals

The main advantage of trading using opposite Sovereign Metals and Future Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovereign Metals position performs unexpectedly, Future Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Future Metals will offset losses from the drop in Future Metals' long position.

The idea behind Sovereign Metals and Future Metals NL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..